54
54 Natural hazards: Major source of risk for poor Prevalence of death due to disaster is 4 times higher in low-income countries Disasters are an important dimension of poverty - - per WDR 2000/2001 With similar patterns of disasters, Peru fatalities average 2900 a year and Japan averages 63

59
59 Novel instrument used: Catastrophe bond Source: Lane, Sponsor creates issuer: Special Purpose Reinsurer, which is the source of financial protection 2. Issuer offers bond to investors: the proceeds are kept in a collateral account. 3. Sponsor pays premium to issuer: premium and bond proceeds from collateral (low-risk) investment in financial markets pay interest to investors. 4. If cat bond is triggered funds are withdrawn from collateral and paid to sponsor 5. If there is no event, bond proceeds/principal is returned to investors.